In the interest swaps markets, it is commonplace to hedge mismatches using a reset system which reduces outstanding fixing risk. Reset systems buy and sell FRAs (Forward Rate Agreements). Known reset systems include FRA-Cross operated by ICAP Europe plc. FRA-Cross offers traders the possibility of reducing floating rate mismatch risk arising from interest rate swaps and other trades. A further known system is Tlfast, operated jointly by Tullet Liberty Securities and Chicago Mercantile Exchange. This system offsets with daily expiring 3-month futures trades rather than FRAs.
Whilst the known systems provide a degree of risk exposure management, we have appreciated that it is desirable to increase the amount of risk that can be offset through the reset process.